High-Touch Customer Service Meets Cutting-Edge Technology

Bank Director recently spoke with Gary Norcross, president of Integrated Financial Solutions at ALLTEL, about technology trends shaping the financial services industry.

How can banks create a balanced synergy between high technology and high-touch customer service?

Banks, especially those in the mid-tier market and smaller, are struggling with the balance between the money they are spending on technology and the return they receive from that expense. They all are trying to accomplish a common goal of providing high-touch customer service while reducing their noninterest expense. This high-touch customer relationship management has come into focus for banks of all sizes. Now we see the large financial organizations working with technology to help provide that high-touch personal customer relationship that the mid-tier market was founded upon.

In this tightening market, and I know the directors are feeling this, banks can compete in one of three ways: number of locations, price, or high-touch customer service. Clearly the mid-tier market is focusing on high-touch customer service. I talk to many presidents and CEOs, and in every conversation there’s a common theme of not understanding today’s rapidly changing technology. I recently had a CEO give the analogy that he had a giant furnace in the basement called technology and he just pops in money now and then, it burns up, and he doesn’t see a lot of return. However, I should explain that simply understanding and implementing the latest technologies does not address process efficiencies and how these new technologies integrate to provide more high-touch customer service.

Technology companies are starting to do well because a change in technology and business philosophy is occurring where products are becoming integrated into a suite offering. You can go to 40 different vendors and buy 40 different products, but unless you’re a very large bank, you can’t spend enough money to get those 40 products actually working together. The result is inefficiency and more distance from your customers because you have 40 disjointed products. If they call and ask about their deposit account, they are referred to another person. Or worse, they get a statement in the mail and it has a deposit product on it, but not their loan information. The issue might be as simple as the loan is in their full name, Gary Adam Norcross, and their deposit account is under Gary A. Norcross and the accounts are not linked. These are common things directors and CEOs struggle with.

One thing I stress to CEOs is they need to look at banking solutions the same way they look at software on their desktop. For example, if you use the Microsoft suite of products, chances are you are going to use all of their products. Chances are you are not going to use Microsoft Word, LOTUS 123, and Harvard Graphics. If directors and CEOs want to gain the synergies and benefits of technology, they need to look to a one-source provider that can bring all of that together in a seamless suite. This synergy between a one-source technology provider and high-touch customer service allows banks to focus externally on their customers and not internally on their organization’s technology.

Why do you think the suite solutions are a more viable option than best of breed for the mid-tier market, and can you briefly describe both of those options for our readers?

To me, best of breed describes a company that offers an individual product that clearly sets it apart from other products on the market. For example, ALLTEL has a division that it believes to be the best-of-breed product for mortgage servicing. It processes more than 50% of mortgages in the United States. Nevertheless, when you look at the mid-tier marketplace, ALLTEL has another mortgage serving package that is part of the suite of offerings that we sell to those clients. Is it as robust as ALLTEL’s best of breed? Absolutely not. But, the mid-tier marketplace doesn’t need that level of sophistication because they don’t have the same loan volume as Bank of America or Washington Mutual for example.

There’s an entire range of financial institutions that have wanted to buy the absolute best-of-breed products. The problem with that approach in a mid-tier or smaller institution is they’ll buy the best-of-breed loan origination product and they’ll buy the best of breed consumer lending product, but they have to duplicate the keying of that customer’s consumer loan data. In other words, a customer may come in to take out a car loan and the bank runs it through the state-of the-art, best-of-breed consumer origination product and it comes back approved with a turnaround time of “x” minutes. Then the bank must go into its core processing system and key in that same loan, key it in as approved, and generate the check or wire the funds in order to disburse the funds for the loan—each step with a siloed system. This very issue causes most banks to lose any efficiency they might have gained by using their best-of-breed product.

The reality is that mid-tier institutions cannot afford to have the infrastructure or the programming talent to get these two best-of-breed products to talk. Some bank presidents will say, “I’ve spent $2.5 million on my teller system to roll it out in more than 110 branches and I still can’t get it integrated into my core system.” Or, “My core system ships a new release and it breaks my teller interface and causes all of this trouble.” What they are really saying is that the return on their investment has not been realized. That is the opportunity to talk to them about going to a suite-type decision, where they are buying a core product that already has loan origination functionality, teller functionality, call center functionality, deposit origination…all of these things in one application so that they are dealing with one company providing a total package solution. We are seeing a tremendous amount of success in the best-of-suite arena in the mid-tier market because I think bank executives are finally getting frustrated with feeding their furnace without seeing results.

The directors are there for one thing and one thing only—they want to grow their market share. This means they need to grow their return on assets and push their efficiency ratios lower. When I’ve met with bank executives, most do not care about the technology; they care about interaction with the customer and growing their market share—in other words, the synergy between technology and how they can better provide high-touch service for their customers.

Do you think that customers’ trust in technology is improving and how can banks reassure their customers that their information is safe?

To this day my parents still do not have an ATM card even though ATM cards have been around since the late 1960s and early 1970s. So to get older consumers to embrace banking technology you must aggressively market to that generation to overcome their concerns. But for today’s younger generation, trust in technology is becoming less and less of an issue because they have grown up with technology being more readily accessible. My children, for example, have never known a time without a computer. The other day my daughter asked me what a record album was and it suddenly dawned on me that she had never seen a record album in her life. She had never known a world without CDs. As this generation ages, getting them to accept new technologies is going to become a non-event.

There are many steps that banks can take to ensure that their technology is safe. One example of this is an annual SAS 70 audit, an operational/procedural audit done by a third-party firm on a bank’s data center or processing location. Another example is a penetration study, where someone attempts to break into a bank’s computer system in order to rate its security measures. There are opportunities to educate and inform the workforce and create consumer awareness about the steps a bank is taking to make data secure.

Years ago it was pretty easy for customers to see that their money was secure—they walked in and saw the vault. Security is becoming less of an issue in younger generations, but it is always going to be an issue in the middle and older generations. It is always a good idea to have annual audits of banking computer operations. Most examiners require that anyway, especially if the bank operates in an outsourcing environment.

How is technology creating an even playing field for small to mid-tier banks that are competing with the larger financial service institutions?

Mid-tier and smaller banks have a much easier time embracing and implementing technology at a faster rate. Think about a $500 million bank rolling out document imaging. It can implement this solution in a matter of months. Compare that, on the other hand, with a very large institution. It could possibly take years to deploy the same solution.

Second, a large bank is probably not going to be able to embrace a suite-type concept, because of the sheer politics in obtaining a consensus among decision makers to embrace this concept. But when you are in a mid-tier market or below, there is a clear decision maker or leader who drives solutions across the organization. Because of the differences, in many ways, technology is creating a very level playing field. The opportunity for the mid-tier market is to realize the advantages they may have and exploit them.

How can banks strengthen their brand identity to consumers through the technical interfaces that they encounter?

There are technology opportunities banks need to leverage to make sure their brand is hitting home, so that whether customers are using an Internet banking product or interacting in a branch, each delivery channel should reinforce the brand message with the same look and feel. Banks sometimes make the mistake of turning their technology solutions into a bombardment of advertising. Frankly, when people log on to a bank website, they want to access the bank. They don’t necessarily want to be sold and inundated constantly with additional information. Banks should be careful with these issues. Many times a bank wants to be high touch/high feel; however, they send a message through their technology delivery channels that they are high volume/no touch. But, you can look at that from another angle, too. If you want to be a very low touch/high-technology, volume-oriented institution with zero brick and mortar, then obviously technology can be used in a number of ways to help that image.

What unique technology challenges face today’s small to mid-tier banks?

Some banks have been hesitant to embrace any technology whatsoever or are using very limited technology and are operating like they were in the 1970s, 1980s, and early 1990s. They are questioning the costs and the return. Those institutions are going to face an entire generation that doesn’t know how to use a product that doesn’t have a mouse and therefore will face tremendous investments that will need to be made in order to catch up with the rest of the banking industry.

I’m not one to advocate being an early adopter of technology, especially in the banking industry. I think that you have to be a pragmatic user of technology. Banks need to be very forthright in looking ahead and strategically planning the next three to four years. This plan can lead to decisions such as, “This is the year that we put in a Wide Area Network (WAN), or this is the year that we are going to have an Internet banking presence.” It’s amazing that there are banks with a full-blown Internet presence that do not have their branches linked together through a WAN or deploy personal computers throughout their institution. Being able to take logical steps and being informed about technology so that you don’t make rash decisions is a challenge banks face.

Do you see mainframe applications being phased out?

Platform and operating system technologies are not as important as they once were. There have been many technology improvements in the programming language being used, so that platforms are becoming less important. There are people who think they have to have a mainframe or nothing. The reality is with browser front-ends on everything and many things being written in platform-independent languages such as Java, and with all of this interdependency and interactivity, that bankers are less concerned about the platform and more concerned about the business functionality it produces and the cost they have to pay for that business functionality. In the long run, any platform that’s not going to keep up with the business functionality required at the cost the market is willing to pay will be phased out.

Can you address what you see happening in the next few years for mid-tier banks in terms of technology trends?

The main trend is that all banks will have an Internet presence and will be required to have an access point through that delivery channel into their financial institution. There will be a tremendous surge in wireless applications, where the wireless phone you see strapped to everyone’s hip will become an additional delivery device for financial institutions. And I think we’ll see most banks going to a suite-type application, which will put tremendous pressure on best-of-breed companies that do not have as broad of a focus. This is why so many acquisitions are occurring in the technology sector. Many best-of-breed products are being bought up and integrated into larger suites of applications. Clearly financial institutions are moving toward one-stop shopping with regard to technology, so they will be dealing with one primary vendor, not 40.

So, the paper check is not going away?

Believe it or not, checks will not die in the next three to five years, although their demise is still predicted. While growth in check volumes is leveling off, there are increases being processed every year. Browser-based technology, wireless, and Internet delivery channels will be tremendous. And I think the Internet will even make a far more reaching impact. You’ll start seeing banks running their networks with the Internet over the next three to five years and Internet-based ATMs will become a reality. The Internet will continue to grow and become a well accepted delivery channel in the financial sector.

Are banks beginning to see the return on their investment in technology?

Depending on the strategies some banks have implemented, there are many financial institutions beginning to see a return on their investments. The reality is, though, as technology costs are decreased, more and more technology becomes available that costs additional money. The financial institution that is a pragmatic user of technology will continue to see short-term returns on its investments.

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